Using Your Own Transport for Business
Using your own transport for business may be tested in the CII exams R03 or within AF1. Read on to learn what qualifies as a business travel expense, the different ways to recover the cost, and the mileage rates.
The first thing to say is that there’s no tax charge when, as an employee, you use your own car for business purposes and you’re not reimbursed for any more than the allowed rate. (If you’re reimbursed for private travel, then this will be a taxable benefit).
Which parts of the journey qualify?
My friend uses her own car to get her to her place of work which is 25 miles away from her home and then uses it from there to carry out her work. The 25-mile commute to her place of work is treated as private and not business mileage. (Note though that travel to a temporary place of work is normally classed as business travel). Obviously, the travel she then does from there to carry out her job is classed as business travel.
Recovering the Travel Expenses
You are entitled to deduct qualifying travelling expenses from taxable pay if they are incurred ‘performing your employee duties’. In most cases though, employers reimburse business mileage so that their employee’s expenditure is balanced by the payment made by the employer. Should this not be the case, then you’d need to claim tax relief yourself (just as a self-employed person would).Learn what qualifies as a business travel expense, the different ways to recover the cost, and the mileage rates - perfect for CII R03 exam revision. Click To Tweet
As you are probably aware, the revenue has a tax-free approved system of mileage rates, which can be paid to employees without any income tax or NICs. Currently, the figures are 45p a mile for the first 10,000 business miles in the tax year and 25p for each additional mile over 10,000. For NIC purposes, there is a flat rate of 45p for all business miles.
More than the Statutory Amounts Means More Complication
My friend gets paid more than these statutory amounts paid to her by her employer, so she is taxed on the excess usually done through a complicated system of an annual adjustment and then re-adjustment of her tax code.
If her employer had paid her less than these amounts, then she could claim tax relief for the difference.
Another Reason to Car Pool
Just as an aside – if you take a colleague on a business trip in your own car, the employer could also pay you up to 5p per mile for each passenger free of tax.
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